CMS Issues Guidelines For Medicare Sales Agents

Ruzanna Harutyunyan's picture

CMS on Monday revised its guidelines for compensation for health insurance agents and brokers who market Medicare Advantage and Medicare prescription drug benefit plans, CQ HealthBeat reports (Carey, CQ HealthBeat, 11/10).

CMS in September issued new rules governing insurance companies, agents and brokers regarding the marketing of Medicare prescription drug plans and MA plans. The rules stipulated, among other things, that commission for sales agents would be required to conform to a structure used in other parts of the insurance industry. First-year commission for a new customer could not exceed 200% of the commission for the next five years, in order to remove the incentive for agents to "churn" beneficiaries between different plans each year.

However, because the regulations were just taking effect, some plans increased commissions in order to lock them in for the next five years. House Ways and Means Subcommittee on Health Chair Pete Stark (D-Calif.) in a letter to CMS wrote that insurers were "gaming" the new regulations by raising commissions to levels "that far exceed any previous year's commissions" (Kaiser Daily Health Policy Report, 10/24).

The new guidelines revise those from September by stating that agents and brokers should receive compensation that reflects fair-market value based on previous commissions, adjusted for inflation for similar products in the same geographic area. In addition, compensation for policy renewals must be exactly half of the compensation paid for that beneficiary in the initial year of the six-year compensation cycle established in the September rules. Agents and brokers who enroll beneficiaries in plans that do not meet their needs should receive reduced compensation, according to the new principles.


The new rules also place similar compensation limits on Field Marketing Organizations -- local or national companies that employ agents or brokers to assist plans in marketing and selling their Medicare products. Before the compensation is disbursed, FMOs would be required to submit to CMS their compensation structures for the previous three years plus the compensation structure they are implementing for 2009. That information also must be provided to agents, brokers or other third parties under contract to market the FMO's plans. Future rate or structure changes could not take effect without prior CMS approval. CMS is accepting comments on the changes until Dec. 15.


Acting CMS Administrator Kerry Weems in a statement said, "The steps we are taking should help to make sure that brokers and agents are selling health or drug plans that best meet beneficiaries' needs when open enrollment begins Nov. 15," adding, "The rule we are issuing will help to resolve any confusion about how the private plans should implement compensation structures to meet those needs."

Karen Ignagni, president and CEO of America's Health Insurance Plans, in a statement said it was important that beneficiaries receive the information they need during open enrollment and that "brokers receive reasonable compensation for the valuable services they provide, and that there are clear standards in place" (CQ HealthBeat, 11/10).

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